The young consumers powering China’s new gold rush

As global producers of diamonds and precious stones continue to invest in the China market, aiming to cultivate a loyal consumer base, there are signs that the interest of young Chinese has moved on to gold. Between January and October 2023, gold and silver jewelry sales in China increased 12 percent, powered in no small part by younger consumers. According to a 2023 survey by Hong Kong jeweler Chow Tai Fook, around 70 percent of Chinese consumers aged 18 to 40 said they planned to buy pure gold jewelry over the course of the year. This is significant in a country where older customers have traditionally dominated the gold jewelry market and, only a few years ago, young consumers considered gold jewelry tacky and old-fashioned. This shift is reflected in widespread social media discussions in China on platforms like Xiaohongshu and Douyin, where users actively discuss and recommend affordable gold jewelry items, like small, marble-like gold "beans" that cost between 450 to 550 yuan ($63 to $77) and weigh as little as one gram, making them accessible even to those with limited budgets. Changing perceptions There are several motivations at play behind growing demand for gold jewelry and accessories among China’s younger population. Aesthetically, the resurgence of gold's popularity in China among younger consumers is inextricably linked to the guochao (aka “national trend”) movement, which incorporates Chinese cultural elements into contemporary products and brands. A recent Ipsos survey found that 91 percent of Chinese respondents favored jewelry infused with traditional Chinese motifs. This cultural revival is also reshaping traditional gold craftsmanship, with ancient techniques like "gufa gold" — an ancient Chinese goldsmith technique that makes intricate, carved gold pieces — witnessing a surge in popularity. The market share for "gufa gold" surged from a modest 2 percent in 2019 to a substantial 16 percent in 2021, with lines like Chow Tai Fook’s "heritage collection" registering impressive sales growth. Safe haven Perhaps more importantly, China’s current economic climate and the perceived safety of investment avenues has become a central concern for younger and middle-class consumers. At major Chinese banks, the one-year deposit rate is anywhere from around 1.5 percent to 1.8 percent and has only declined in recent months. Meanwhile, gold has yielded an annualized return of 5.8 percent over the past three decades, and the global spot prices for gold hit all-time highs late last year, signaling its status as a reliable investment. In China, where most consumers have little access to overseas investment products, gold is one of the relatively few avenues available to them to diversify their assets. With another typical investment area — real estate — teetering, the general public continues to move their yuan into gold bars and jewelry. All of this adds up to a lot of the precious metal changing hands in the country. In China, where most consumers have little access to overseas investment products, gold is one of the relatively few avenues available to them to diversify their assets. In the first half of 2023, gold consumption in China grew more than 16 percent year on year, reaching some 554.88 metric tons, according to the China Gold Association. In the January to September period, that figure had increased to 835.07 tons, a rise of 7.3 percent YoY. Within that total, gold jewelry consumption increased nearly 6 percent YoY to 552 tons, while gold bars and coins reached 222.37 tons, an increase of nearly 16 percent. Interest in and demand for gold is nothing new in China, which has been the world's largest gold producer since 2007 and leading gold consumer since 2013. But what is interesting is the buyer profile. Specifically, the inclination of Chinese Gen Zers to purchase gold leapt from just 16 percent in 2016 to nearly 60 percent in 2021, and as of 2023, around 64 percent of 18- to 24-year-old consumers in mainland China and Hong Kong said they purchase pure gold jewelry as a form of self-reward or for daily wear. The sales pitch What does this all mean for global jewelry and hard luxury brands, which have poured millions into the China market in recent years looking to tap younger consumers? For the likes of LVMH-owned Tiffany & Co., it means a greater emphasis on experiences and innovative efforts to attract consumers, along with a move to push its rose and yellow gold collections. Tiffany’s greater focus on China was highlighted by the premiere of its Blue Book 2023 Fall collection in Shanghai, marking the first time the collection was globally unveiled outside of New York. The brand also opened its first Blue Box Cafe in mainland China inside its Shanghai flagship, leveraging the luxury cafe trend that has seen the likes of Cartier, Dior, and Maison Margiela launch similar offerings in recent years. The reason for a greater emphasis on China events and affordable experiences is simple: They work to attract younger middle-class consumers and keep a brand front-of-mind even as they hold back on big-ticket purchases. Amid the current fever for gold jewelry and accessories, they further serve to insulate foreign luxury brands from local and regional brands like Chow Tai Fook, which dominate the pure gold category but are more transactional and less experience-focused. Young consumers may be spending their hard-earned cash on gold jewelry and accessories with an eye on long-term investment, but they can also splurge on a coffee and pastry at Shanghai or Hong Kong’s Blue Box Cafe, or Louis Vuitton’s restaurant in Chengdu. Whose best friend? While luxury jewelers and brands with a fine jewelry component continue to find ways to attract younger consumers to keep spending — even in small amounts — diamond-centric jewelers could be set for challenging times in the greater China market. Hong Kong-based Tse Sui Luen (TSL), for example, recorded a loss of around HK$50 million ($6.3 million) for the six months ending September 30, 2023, compared to a profit of approximately HK$2 million ($255,618) for the six months ending September 30, 2022. The company blamed waning consumer confidence owing to “a troubled property market and gloomy economic outlook,” noting a gradual improvement in overall sales performance in mainland China mostly due to 24-karat gold jewelry sales, but with lower profit margins. In essence, mainland Chinese consumers are buying more gold, but in smaller quantities per purchase, and fewer diamonds and precious stones. Could this turn around if and when the economic picture brightens in mainland China? Possibly, if you listen to the relatively rosy outlook of De Beers, which anticipates an influx of up to 200 million Chinese consumers into the middle class by 2030 who, theoretically, may be eager to purchase diamond jewelry. But until then, diamonds may take time to regain their luster among value-conscious Chinese consumers more interested in safer-haven investments.

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The young consumers powering China’s new gold rush